How to choose what asset type to work with in investment sales?

I could not find a specific thread on this topic, so curious to hear yalls input. I'm very interested in getting into investment sales but I do not know which asset type would be best. I am leaning towards retail since I kind of already have a few connections in that area, but don't want to rule out anything yet (especially since I do not even have a job lined up). Thanks in advance.

Comments (27)

Sorry if this is a bit sloppy, writing on my phone. Here's a quick answer.

i think it's ideal to work on multiple asset classes for the broadest exposure, or at least work on multifamily + one of the other 3 for experience with both ARGUS based and excel based modeling.

I've worked on all 4 in IS and personally found multifamily to be the most enjoyable by far since I thought using Argus and reading/abstracting leases for the other 3 was very tedious (but still good experience To have). I also generally thought multifamily was the most fun since most people are naturally interested in it (I.e. there's an entire tv channel called HGTV for people to just look at living spaces and learn about renovations etc).

The basic pros/cons of the other 3 are:

Office: typically the largest class A buildings (and largest $$$ deals) in a market are office. You look at any city skyline and it's all office buildings. Get to learn about local businesses and their needs. Get to use ARGUS but will have to spend a lot of time tediously reading leases and other financial reports to input into ARGUS.

Industrial: very active rate now, some of the lowest cap rates and also large $$$ deals in many markets. Learn more about the logistical needs of businesses (storage/production/distribution) and learn about ecommerce and stuff. Not as tedious to model since most properties only have 1-4 tenants. The actual buildings themselves are the least interesting by far since they are typically just big ugly boxes out in rural areas. Expect lots of driving.

Retail: Tenants are the most familiar since everybody knows all the retail brands more so than office/industrial tenants. Can be cool to see what stores are expanding and doing well and synergize with other stores vs dying and becoming obsolete. For larger malls, the modeling can be extremely painfully tedious. Execution is very unpredictable since the industry is so in flux and nobody can really agree on pricing like the other 3 classes, so you may have to bust your ass on deals that either don't trade or or take a very long time to trade or trade lower than you were hoping. Overall will have the highest caps and lowest $$$ amount of the 4.

Industrial: very active rate now, some of the lowest cap rates and also large $$$ deals in many markets. Learn more about the logistical needs of businesses (storage/production/distribution) and learn about ecommerce and stuff. Not as tedious to model since most properties only have 1-4 tenants. The actual buildings themselves are the least interesting by far since they are typically just big ugly boxes out in rural areas. Expect lots of driving.

Maybe I'm just a weirdo, but I think industrial is incredibly interesting in its current form, and the future looks even more interest. It, by far, has the most opportunity to innovation in the next couple decades. There is nothing boring about a four level, 2.5M+ square foot, distribution center that is over 10 stories high.

Industrial: very active rate now, some of the lowest cap rates and also large $$$ deals in many markets. Learn more about the logistical needs of businesses (storage/production/distribution) and learn about ecommerce and stuff. Not as tedious to model since most properties only have 1-4 tenants. The actual buildings themselves are the least interesting by far since they are typically just big ugly boxes out in rural areas. Expect lots of driving.

Maybe I'm just a weirdo, but I think industrial is incredibly interesting in its current form, and the future looks even more interest. It, by far, has the most opportunity to innovation in the next couple decades. There is nothing boring about a four level, 2.5M+ square foot, distribution center that is over 10 stories high.

I don't disagree, I think it can be very interesting and look forward to all the innovation in the years ahead, I just think in general the typical industrial building is not that exciting.

Good stuff. As you said, ideally I would like to work on multiple asset classes (especially when first starting out), but it seems like the more senior people I plan on reaching out to are pigeonholed into certain asset classes. For example I was looking at CBRE in my city and they have a specific team for multifamily, and I was looking at another profile of an employee there and he specifically works on retail. I have not really seen any profiles of anyone that work on multiple asset classes. Is there any reason to this? Thanks for the info.

To be a stud IS broker you usually have to dedicate your time specializing on one asset class. There is no way to be a true expert across various asset classes with powerful networks in each in the IS world. It can be done in the debt space.

Can you or anyone else expand on this? Why does retail have the highest caps? And why do brokerage firms have specialized IS teams instead of people dabbling in multiple asset classes? I would like to work in investment sales but do not want to pigeon hole myself into an asset class.

If you think of a cap rate as a risk premium, it would make sense for retail to have the highest cap rates due to having the most uncertain/risky outlook. Many retail properties have declining sales and inefficient/obsolete layouts/locations which require redevelopment due to e-commerce growth and traditional anchors going out of business. I've seen tertiary retail centers with declining sales trade for 10-20%+ caps. There are also plenty of retail properties doing fine but they tend to trade less frequently.

Specialization will vary by office. Some offices have a shared pool of analysts doing everything while others will have specialized analysts assigned to each broker. The pooled approach gives analysts a broader experience, more balanced work load, and causes less disruption if somebody leaves. The specialized approach allows them to develop more expertise so the broker can give them more responsibility / less oversight (and tbh sometimes brokers just don't like sharing resources with each other).

FYI - the retail guys are charging higher sales fees due to the turmoil. We were selling $50-60mm apartments for 50 bps fees without flinching while retail guys were asking 100 bps to spend time on same size power centers due to execution risk...

If you're investment sales, your day to day for the foreseeable future will probably consist of hammering the phone to drum up business. It is a sales job, on a commission only salary, where a large part of your day is facing constant rejection on the phone and chasing down empty leads.

You need to pick an asset class that excites you. Do big office skyscrapers turn you on? Do remodeled value-add opportunities in gentrifying neighborhoods get you hard? Or do you get off on a single tenant KFC in Alabama?

Ultimately, decide for yourself what gets you up in the morning, to get in your car and drive to the office to make 100 calls, and work your ass off understanding everything about that asset.

If you're investment sales, your day to day for the foreseeable future will probably consist of hammering the phone to drum up business. It is a sales job, on a commission only salary, where a large part of your day is facing constant rejection on the phone and chasing down empty leads.

You need to pick an asset class that excites you. Do big office skyscrapers turn you on? Do remodeled value-add opportunities in gentrifying neighborhoods get you hard? Or do you get off on a single tenant KFC in Alabama?

Ultimately, decide for yourself what gets you up in the morning, to get in your car and drive to the office to make 100 calls, and work your ass off understanding everything about that asset.

If you for sure want to be an IS broker, network trumps everything at the end of the day. Leveraging connections in the space goes a long way. If you want to end up on the principal side long-term, try to get exposure to multiple asset classes so you don't pigeon-hole yourself.

In terms of retail - I think the large strip-center and neighborhood retail space is pretty healthy and ripe for positive transformation/redevelopment. It's going to get uglier in the mall/power center space in most markets before it gets better.

What if I wanted to eventually work in acquisitions for a REPE? Which asset class if any is the best to work with in investment sales? I get why this may be hard to answer and there may not be any answer at all.

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